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UAE Gains Edge In $165 Billion Caspian Oil & Gas Market

The United Arab Emirates has spearheaded the Gulf Cooperation Council (GCC) initiative to increase its presence in the Caspian Sea nations—Kazakhstan, Azerbaijan and Turkmenistan - all petrostates still suffering from almost three years of bearish oil markets.

New data from MEED Projects, a consulting firm that tracks development in the Middle East and North Africa, shows UAE-based Arabtec’s $1 billion project to construct the Abu Dhabi plaza in the capital of Kazakhstan, Dragon Oil’s drilling license in Turkmenistan, and shipping contracts to support other oil majors in the region.

Dragon owns a 100 percent stake in the Cheleken concession, which covers 950 square kilometers of two offshore oil and gas reserves. The company’s presence in Turkmenistan is not altogether new and the company claims a majority of its 2,000 employees are Turkmen nationals. Even the 25-year Cheleken lease was granted back in the year 2000.

Arabtec’s development project in the Kazakh capital will build 556 new luxury apartments, along with 107,000 square meters of office space and a five-star hotel. This week, kazinform reported that Abu Dhabi and Astana plan to become twin cities after signing a memorandum of mutual understanding and cooperation.

Kazmunaygas is among the juiciest morsels in the privatization mix, although no value has been placed on the shares to be floated yet. It pumps a third of Kazakhstan’s oil and is a 20 percent partner in the consortium that is developing the giant Kashagan field in the Caspian Sea – making it a fruitful investment for the UAE as its share of imported natural gas climbs due to growing demand.

Last year, Dubai’s Topaz Energy and Marine won a $350 million contract to supply vessels to transport oil extracted by Chevron from Kazakhstan’s portion of reserves in the Caspian Sea. The same year, British Petroleum enlisted Topaz’s services for 14 offshore support vessels for use in Azeri waters.

For Azerbaijan in particular, the GCC’s position favoring Baku in the Nagorno-Karabakh territorial dispute with Armenia encourages the bilateral bond. Earlier this month, the Azeri Economy Minister announced $284.4 million in ambiguous investments in the UAE, which has contributed roughly $780 million to the Azeri economy over the past several years.

MEED counted $165 billion in projects funded by the GCC, with $69 billion in investments in Kazakhstan, $60 billion in Azerbaijan and $37 billion in Turkmenistan.

"As we all know, the projects market in the GCC has been in steep decline of more than 40 per cent over the past 18 months due to lower oil prices," said Ed James, director of content and analysis at Meed Projects. "While the three Caspian Sea oil and gas producers have not been immune to this fall, they do offer alternative opportunities for companies struggling to win work in the Middle East, particularly given their proximity to the region."

As lackluster oil prices continue to beleaguer markets, the GCC countries can manage modest investments in nations of geopolitical interest by taking advantage of massive sovereign wealth funds groomed for “rainy days” or, in this case, years. The UAE has made the biggest strides in closing the gap between the Caspian states, leaving its brothers on the Arabian Peninsula behind in the natural gas chase.